road to recovery

In previous decades, financial markets also faced turbulent periods and sharp declines due to global economic and political events.

➡️ These fluctuations often generated concerns and speculations about a possible impending recession. However, by analyzing the history of the S&P 500 index (SPX500) and its responses to previous crises, we can glimpse an encouraging and even surprising panorama.
➡️ Specifically, the recent market decline between January 2022 and October 2022, which amounted to approximately 27%, left many investors and analysts apprehensive about the future of the global economy. However, it is crucial to address this situation with a broader approach and consider the historical data of the SPX500 during previous recessions.
➡️ In this article, we will explore the significant drops of the SPX500 throughout the years and the economic crises that triggered them. In particular, we will examine the recent market downturn and how it compares to past events. Most importantly, we will present a contrary and optimistic perspective on the possibility of a recession, considering the factors that can drive economic recovery and the resilience demonstrated by financial markets over time.

2000-2002: The Dotcom Bubble

➡️ Between March 20, 2000, and October 7, 2002, the market faced a recession that left deep marks on the performance of the SPX500. During this period, the index suffered an impressive drop of 50.6%, falling from US$ 1552 to US$ 768.
➡️ This crisis, known as the Internet Bubble or Dotcom Bubble, was triggered by the collapse of the technology and internet stock market. Before the bubble burst, technology and internet companies were being traded at inflated prices, fueling an irrational euphoria in the stock market. However, this speculative high soon gave way to a bitter reality, and many of these companies ended up bankrupt or losing a large part of their value.
➡️ The historic drop of the SPX500 had widespread effects on the global economy. Investors suffered major financial losses, many companies closed down, and unemployment increased significantly. Market confidence was also shaken, and investors became more cautious in their financial decisions.
Spx500 Weekly Chart
➡️ However, this crisis also brought important lessons for investors and the economy as a whole. The events of 2000–2002 highlighted the importance of a cautious and grounded approach to investing, emphasizing the need to avoid excesses and speculative bubbles.
➡️ Since then, regulatory measures have been implemented to protect investors and increase transparency in financial markets. In addition, investors have learned to value portfolio diversification and careful analysis of the fundamentals of the companies they invest in.

2007–2009: The Global Financial Crisis: The Collapse of Subprime

➡️ The global financial crisis of 2007-2008 was a historic event that shook the world economy. It was triggered by the collapse of the US real estate market, which led to the spread of toxic assets throughout the world’s financial markets. These assets were called subprime mortgages, which were loans granted to people with low financial capacity and therefore had a high probability of default.
➡️ The crisis worsened after the bankruptcy of investment bank Lehman Brothers in September 2008. This was the largest bankruptcy in the history of the United States and generated a great crisis of confidence in financial markets. As a result, there was a sharp drop in the value of stocks, including the S&P 500 index, which fell 57.79% during the period from October 11, 2007 to March 6, 2009.
➡️ The 2007-2008 financial crisis was an event that deeply affected the global economy and generated a series of consequences that are still felt nowadays. Many investors lost their savings, and several companies went bankrupt. Moreover, the crisis had a significant impact on the job market, with the unemployment rate reaching alarming levels in various countries.
Unemployment Level  Monthly Chart
➡️ However, the crisis also brought significant changes in financial regulation and global economic policies. It led to increased transparency in financial markets and greater supervision of banks and other financial institutions. In addition, the crisis generated a greater focus on global financial stability through the creation of new institutions and policies to prevent future crises.
➡️ Nowadays, the global economy is still recovering from the 2007-2008 financial crisis. Although the financial markets have recovered, many countries still face economic challenges such as increasing public debt and economic inequality. However, the financial crisis has generated greater awareness of financial risks and a greater emphasis on global financial stability.

2010: Euro-zone in Danger: The Sovereign Debt Crisis

➡️ The Eurozone Sovereign Debt Crisis was a period of economic instability that began with the Greek debt crisis and spread to other peripheral countries in the Eurozone, such as Portugal. Investors began to worry about the sustainability of these countries’ debt and the possibility of a potential collapse of the Eurozone, which generated great uncertainty in the financial market. This period was marked by a 17.47% drop in the S&P 500 index, reflecting investors’ concern about the economic situation in Europe.
➡️ During this period, several measures were taken to try to stabilize the economic situation of the region. The countries affected by the crisis implemented fiscal austerity programs to reduce their budget deficits and decrease their dependence on external loans. In addition, financial protection mechanisms were created to help countries in difficulty refinance their debts and avoid a large-scale economic collapse.
eurusd weekly
Eurusd Weekly Chart
➡️ Despite the difficulties faced, the Eurozone sovereign debt crisis had a positive long-term impact as it led to increased economic and fiscal integration of the region. The measures taken during the period helped strengthen the monetary union and create a more solid framework for dealing with economic crises in the future.

2011: The US Debt Ceiling Impasse: Threatening Payment of Bills

➡️ The US government faced a political deadlock over raising the national debt ceiling, which led to uncertainty about the country’s ability to honor its financial obligations. This situation caused a drop in market sentiment, leading to a significant 22.04% decline in the S&P 500 during this period.
➡️ As the crisis lingered, the government struggled to reach a consensus and investors became increasingly anxious about the possible consequences of a default. The situation worsened as credit rating agencies threatened to downgrade the country’s credit rating, and the stock market reacted with great volatility.
spx volatility
Volatility of the SPX500 | Daily Chart
➡️ The crisis had far-reaching implications for both the US economy and the global financial system. Although the government eventually reached an agreement to raise the debt ceiling, the event highlighted the need for greater political stability and fiscal responsibility to avoid similar crises in the future.

2012: Europe in Crisis Again: The Challenge of Sovereign Debt

➡️ Between 2012 and 2013, Europe faced a new sovereign debt crisis, which affected the economy of countries such as Spain, Portugal, and Italy. This situation generated great concern about economic contagion in other nations in the region, which highlighted the fragility of the European financial system.
➡️ As a result, during the period of March 27, 2012 to June 4, 2012, the S&P 500 index experienced a decline of 11.38%. The economic uncertainties generated by the problems in Europe were reflected worldwide, affecting economies that maintained trade relations with the region and having significant impacts in various sectors such as finance and exports.
europe50 weekly
Europe50 Weekly Chart

2015-2016: Chinese Slowdown: The Impact on Global Economy

➡️ The Chinese economy has been one of the fastest-growing economies in the world, but in recent years it has started to slow down. This slowdown has caused concern among investors, as the global economy is closely linked to China. Many sectors depend on exports to China, and any slowdown in the Chinese economy can have a significant impact on these sectors. That’s why the S&P 500 index fell 15.46% between May 19, 2015, and February 11, 2016.
➡️ During this period, many investors closely monitored the Chinese economy and its impact on the global economy. Some experts argued that the Chinese government should take measures to stimulate the economy and prevent a new slowdown. Others warned that the Chinese economy faced structural challenges that would take time to overcome.
➡️ Despite the concerns, some sectors of the economy had a relatively good performance during this period. For instance, the healthcare and technology sectors were less affected by the Chinese economic slowdown. Some investors also saw this as an opportunity to invest in undervalued stocks and assets.
SSE Composite Index Daily Chart
➡️ In general, the Chinese economic slowdown was a major event that had a significant impact on the global economy. Although it caused concern among investors, it also created opportunities for those willing to take risks and invest in undervalued assets.

2018: Increase in Interest Rates: The Impact on the Finances of the USA

➡️ In January 2018, the Federal Reserve, the central bank of the United States, raised its interest rates in response to solid economic growth. This increase in interest rates generated concerns among investors and economics experts, as it could result in possible excessive monetary tightening and negatively affect the economy and markets, including the S&P 500 index, which recorded a 12.11% drop during that period.
➡️ Some analysts argue that the increase in interest rates may slow down consumption and investment, as companies and consumers will have to pay more interest on their loans. On the other hand, other experts believe that the increase in interest rates is a sign that the United States economy is strengthening and that it is a necessary step to avoid inflation.
Interest Rates
➡️ Regardless of the perspective, it is important to note that the increase in interest rates in the United States has implications not only for the American economy but also for the global economy, since many countries have their currencies indexed to the US dollar. Therefore, it is necessary to closely monitor changes in interest rates and their possible impacts on financial markets worldwide.

2018: US-China Trade War: The Global Trade Confrontation

➡️ The increasing trade tensions between the world’s two largest economies have generated uncertainties in the markets and concerns about global growth. Although the trade war has been a major point of concern for many investors, it is important to note that other factors have also contributed to the fall of the S&P 500 during this period. For example, a series of disappointing economic reports and concerns about monetary policy have also weighed on the markets.
➡️ Moreover, the US-China trade war may have significant implications in the future. Some companies may choose to change their production and suppliers, while others may decide to postpone or cancel their investment plans. This could have lasting effects on the global economy and international politics.
➡️ Still, there is room for optimism. Negotiations between the US and China continued amid trade tensions, and in December 2018, the two countries agreed to suspend new tariffs for 90 days while they worked on a more comprehensive trade agreement. While there is uncertainty about the outcome of the negotiations, this pause in commercial hostilities can be seen as a positive step towards global economic stability.
➡️ Overall, although the US-China trade war was a significant factor in the fall of the S&P 500 during the period from September to December 2018, it is important to note that other factors also played an important role. Furthermore, the long-term implications of the trade war are still unclear and may have significant impacts on the global economy and international politics. However, there are signs of hope with ongoing negotiations between the US and China.
Usdcnh Weekly Chart

2020: The COVID-19 Pandemic: The Market in Quarantine

➡️ The pandemic outbreak of the new coronavirus in early 2020 led to a global public health crisis, which forced governments worldwide to impose strict social isolation measures to contain the spread of the virus. These restrictions, while necessary, had a significant impact on the global economy, causing a sharp drop in financial markets and triggering a worldwide recession.
➡️ During this period, the S&P 500 experienced a significant drop of 38.87%. This was due to the sudden decline in investor confidence, as the pandemic posed a significant threat to the global economy. Despite this, governments and central banks have since implemented various measures to mitigate the impact of the pandemic, including large-scale stimulus packages and interventions in monetary policy, which have helped stabilize financial markets and support economic recovery efforts.
Eurusd Daily Chart

2022: Monetary Adjustment: A Recovery at Stake

➡️ In response to the growing inflation, the United States Federal Reserve implemented more aggressive interest rate hikes during this period. This measure aimed to combat inflation, but also raised concerns about its impact on lending conditions and economic growth. As a result, the S&P 500 experienced a significant drop of 27.62%. This drop affected various sectors, including the financial, technology, and energy sectors. Companies in these sectors saw a significant decline in their stock prices, resulting in a decrease in investor confidence and a slowdown in business activities. In addition, the adjustment in monetary policy caused a domino effect throughout the global economy, with other countries adjusting their policies to align with the US measures. This resulted in a shift in the balance of power in the global economy, with the US losing some of its dominance. Nevertheless, the actions of the Federal Reserve were necessary to prevent further inflation and maintain long-term economic stability.
fed interest rates
Fed Interest Rate
➡️ Although there have been past events that significantly impacted the financial market, it’s important to remember that the current recession sentiment may not be fully reflected in the markets.
➡️ Despite inevitable downturns, the economy and markets have shown resilience. The prospect of new highs in the S&P 500 is a real possibility, especially when considering the market’s ability to rebound and the long-term history of economic growth.

Technical Analysis of the S&P 500: Potential Patterns and Resistances on the Horizon

➡️ In the context of historical events that have affected the financial market, it is essential to analyze the technical aspects of the S&P 500 to understand current and future perspectives. Currently, the S&P 500 index is approaching the previous resistance level in the $4820 region. This resistance zone has proven to be challenging, but it can also act as a validation point for a possible “Cup and Handle” pattern.
➡️ The “Cup and Handle” pattern is a bullish trend reversal chart pattern, consisting of a “U” shaped formation (the “Cup”) followed by a correction in the form of an inverted “U” (the “Handle”). The presence of this pattern in the S&P 500 may signal a potential rise after breaking resistance at $4820 . However, it is important to note that the formation of a “Bearish Shark Pattern” is also being considered, which could lead to a new retracement in the index.
➡️ The “Bearish Shark Pattern” standard is a bearish trend reversal graphic pattern that, if formed immediately above the resistance at 4820 points, could suggest further negative correction. The formation of this pattern can impact the formation of the “handle” of the “Cup and Handle” pattern and, consequently, influence the future direction of the S&P 500.
➡️ Given these technical possibilities, it is important for investors to pay attention to the movements of the S&P 500 and carefully consider their next steps. The formation of the “Bearish Shark Pattern” may indicate a bearish reversal and a possible correction in stock prices. A successful breakout of resistance at 4820 points may signal a resumption of highs and open up room for new gains in the market.
➡️ In summary, the S&P 500 is currently approaching the previous fractal resistance at $4,820 and the formation of important technical patterns is underway. The formation of the “Bearish Shark Pattern” should be considered a possible bearish correction, while the possibility of a “Cup and Handle” pattern suggests potential upside after breaking through resistance.
As always, technical analysis should be combined with other information to gain a more complete view and make informed investment decisions.
spx500 weekly
Spx500 Weekly Chart
Remember that technical analyses are just tools to help with investment decision-making and do not guarantee future results. It is important to stay informed and adapt your strategies according to market changes. Consult a financial professional for personalized guidance that aligns with your investment goals.
Safe Trades,
André Cardoso

Risk Warning: Trading financial assets carries a high level of risk and may result in the loss of all your capital. Make sure to fully understand the risks involved before you start trading and carefully consider your investment objectives, level of experience, and risk tolerance. The data and information provided in this content do not constitute financial or investment advice and should not be considered as such. Only invest what you can afford to lose and be aware of the risks associated with trading financial assets.
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